Morning Star Candlestick
A Morning Star Candlestick pattern is composed of a long bearish candle, followed by a short bullish or bearish doji, which is then followed by a long bullish candle. In order to have a valid Morning Star formation, most traders will look for the top of the third candle to be at least halfway up the body of the first candle in the pattern. Black or Filled candles indicate falling prices, and White or Hollow candles indicate rising prices or Bullish reversal.
How to interpret a Morning Star Candlestick?
When found in a downtrend, this pattern can be an indication that a reversal in the price trend is going to take place. What the pattern represents from a supply and demand point of view is a lot of selling in the period which forms the first Black or Filled candle; then, a period of lower trading but with a reduced range, which indicates indecision in the market; this forms the second candle. This is followed by a large White or Hollow candle, representing buyers taking control of the market. As the Morning Star is a three-candle pattern, traders often will not wait for confirmation and will simple place their trades. Traders will however look at the size of the candles for an indication of the size of the potential reversal. The larger the White or the Hollow and Black or the Filled candle, and the higher the White or Hollow candle moves in relation to the Black or Filled candle, the larger the potential reversal.
Shooting Star Candlestick
A Shooting Star looks an inverted Hammer. Unlike the Hammer, the Shooting Star will always represent the onset of a Bearish trend and unlike a Hammer that occurs at the end of downtrend, the Shooting Star will always appear in an uptrend.
Characteristics of Shooting Star:
- Small real body.
- Small or non-existent lower shadow.
- Long upper shadow and the upper shadow needs to be at least twice the size of the real body.
Implication of Shooting Star:
Because the upper shadow is long, it means that during the period when the candle was formed, the buyers managed to drive up the price but the sellers returned to drive down the price so that the price close at or near the opening price.
Interpretation of Shooting Star:
Because the Shooting Star appears in an uptrend, it will represent a possible price reversal. For confirmation of this reversal, the traders will always have to look for an opening price in the next trading session, which is lower than the opening price of the trading session in which the Shooting Star was formed. If it happens, it will mean a downtrend.
The possible shapes of a Shooting Star are shown: